By Jeph Ajobaju, Chief Copy Editor
Parallel market operators are still feasting on the continuous decline of the naira despite the intervention of the Central Bank of Nigeria (CBN) with $51.8 million to prop up the currency of Africa’s largest economy.
On Thursday, the naira depreciated N465/$1 at the back market where foreign exchange (forex) is traded by private Bureaux de Change (BDC) operators, per reporting by Nairametrics.
The CBN had injected $51.8m into the forex market on September 7 through BDCs with hopes to prop up the value of the naira and strengthen the economy.
Association of Bureaux de Change Operators of Nigeria (ABCON) President, Aminu Gwadabe, confirmed that each operator had the naira equivalent of $10,000 put into their account. That day, the naira rose N430/$ at the parallel market.
Despite the fall of naira at the black market on Thursday, however, forex turnover rose 536.7 per cent as exchange rate at the NAFEX window maintained its stability against the dollar to close at N386/$1 during intra-day trading.
Parallel market
Abokifx reports that the naira closed at N465/$1 on Thursday, a drop of N1 compared with N464/$1 on Wednesday, as quoted by Nairametrics.
· The naira had strengthened by about 7.8 per cent within a week in September at the black market when the CBN introduced measures targeted at exporters and importers, to boost dollar supply and reduce forex demand.
· The CBN has sold over $500 million to BDCs since they resumed forex sales on September 7, 2020 after coronavirus lockdown. This was expected to inject more liquidity into the retail end of the forex market and discourage hoarding and speculation.
· Exchange rate has remained volatile after the initial gains.
· Gwadebe said he expects the impact of extra liquidity to be gradual.
· Despite the drop in speculative buying of forex, huge demand backlog by manufacturers and foreign investors puts pressure and creates a volatile situation in the forex market.
NAFEX
The naira remained stable against the dollar at the Investors and Exporters (I&E) window on Thursday, closing at N386/$1.
· This was the same rate of its exchange on Wednesday.
· The opening indicative rate was N385.94/$ on Thursday, an 11 kobo gain compared with N386.05/$ on Wednesday.
· The N393.51/$ was the highest rate during intraday trading before it closed at N386/$. It also sold for as low as N380/$1 during intraday trading.
Forex turnover
Forex turnover at the Investor and Exporters (I&E) window rose 536.7 per cent on Thursday.
· Data tracked by Nairametrics from FMDQ shows that forex turnover rose from $23.56 million on Wednesday to $150.02 million on Thursday.
· The CBN is still struggling to clear the backlog of forex demand, especially by foreign investors wishing to repatriate their funds.
· The sharp increase in dollar supply after the previous trading day’s drop reinforces the volatility of the forex market.
· The supply of dollars has been on decline for months due to low oil prices and the absence of foreign capital inflow into the country.
· As part of measures to check forex abuse and illegal transactions, the CBN last month directed the freezing of accounts of about 38 companies.
· Average daily forex sale last week was about $169.93 million, a huge increase from $34.5 million recorded the previous week.
· Total forex trading at the NAFEX window in September was about $1.98 billion, compared with $843.97 million in August.
· Exchange rate is still being affected by low oil prices, dollar scarcity, a backlog of forex demand, and a shaky economy hit by the coronavirus pandemic.
